United Kingdom Corporate Tax - Guide for International Expansion

Are you planning to do business in the United Kingdom? Then it's essential to understand how corporation tax works and what it means for your company.

In this guide, we'll break down everything you need to know about corporate taxes in the UK, from setting up your business to staying compliant. Whether you're launching a new venture or expanding your business, understanding your tax obligations is key to running a successful operation. And if you're looking for smart ways to save money and manage international payments, we'll also show you how a Wise Business account can help simplify cross-border transactions and keep your finances running smoothly.

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This publication is provided for general information purposes and does not constitute legal, tax, or other professional advice from Wise Payments Limited, its subsidiaries or affiliates, and it is not intended as a substitute for obtaining business advice from a tax advisor or any other professional.

United Kingdom Corporate tax rate in 2025

The main rate of corporation tax in the United Kingdom is 25% for companies with profits over £250,000, while companies with profits of £50,000 or less pay a small profits rate of 19%. Companies with profits between £50,000 and £250,000 benefit from marginal relief, which gradually increases the effective tax rate from 19% to 25%.¹

This two-tier system was introduced in April 2023, replacing the previous flat rate of 19% that had been in place since 2017. The UK's corporation tax rates are competitive compared to other major economies, with the main rate of 25% sitting below the OECD average of around 23.5%.²

UK resident companies are subject to corporation tax on their worldwide profits, while non-resident companies are only taxed on profits from UK sources. A company is considered a UK resident if it's incorporated in the UK or if its central management and control is exercised in the UK.³

The corporation tax applies to all forms of company income, including trading profits, investment income, and capital gains.⁴ However, certain reliefs and allowances are available to reduce the overall tax burden, such as the Annual Investment Allowance and Research and Development tax credits.^{5 6}

Read more about Corporate Tax Planning best practices

How to pay corporate tax in the United Kingdom

Corporation tax in the United Kingdom must be paid in British Pounds (GBP) through HM Revenue and Customs (HMRC). Companies are required to file their Corporation Tax Return (CT600) and pay any tax due within 12 months of the end of their accounting period.⁷

Most companies must pay their corporation tax electronically through HMRC's online services or by using commercial software that supports online filing. Large companies with annual profits exceeding £1.5 million must pay their corporation tax in quarterly instalments, while smaller companies can pay the full amount when filing their return.⁸

The payment deadline is typically 9 months and 1 day after the end of the accounting period for companies paying annually. For example, if your accounting period ends on 31 March, your corporation tax must be paid by 1 January of the following year.⁹

Late payment of corporation tax incurs interest charges at a rate set by HMRC, currently8% per annum.^{10 12} Additionally, companies that file their returns late face penalties starting at £100 for returns filed up to 3 months late, increasing to £200 for returns filed 3-6 months late.¹¹

Let's say your company has a turnover of £1.5 million and operates with a profit margin of 10%, giving it a taxable profit of £150,000.

At the UK's small profits rate of 19% (since profits are under £250,000), the tax owed would be: £150,000 × 19% = £28,500

If your company misses the tax payment deadline by 30 days, it will be charged daily interest at a rate of 8% per annum.

The interest calculation would be: £28,500 × 8% × (30/365) = £187.41

So, the total amount the company would owe is: £28,500 (tax) + £187.41 (interest) = £28,687.41

Companies can also face surcharges if they repeatedly pay late, with rates of 5% or 10% of the unpaid tax depending on the circumstances.¹¹

When expanding your business to the UK, the right financial tools will make the process smoother. Using a platform like Wise Business makes it easy to expand internationally with local GBP account details. A multi-currency account allows businesses to pay for incorporation costs, registration fees, and government taxes in local currency without paying high exchange rate fees.

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Tax Compliance In the UK

Some essential steps to keep your company compliant with UK tax regulations are:

• Register for taxes early: Register within 3 months of starting your business. If your turnover exceeds £90,000, VAT registration is mandatory.¹³ Businesses are also liable for Corporation Tax, Capital Gains Tax, VAT, and, in some cases, the Construction Industry Scheme (CIS).¹⁴
• Understand the current UK corporate tax rate: The main rate is 25% for profits above the corporate tax threshold (£250,000) in the UK. A reduced 19% rate applies to companies with profits below £50,000, which is often relevant for the UK corporate tax rate for small businesses.¹
• Appoint a director: Every Private Limited Company must have at least one director legally responsible for preparing company accounts and reports. A company secretary may assist, but directors remain accountable.
• File annual returns: After your financial year ends, you must file annual accounts with Companies House and submit a Company Tax Return to HMRC. The first accounts are due 21 months after registration, within 9 months of each financial year-end. The Company Tax Return must be filed within 12 months after the accounting period ends.
• Avoid penalties: Late filing can result in fines starting at £100, which increase the longer you delay. If your tax return is late three times in a row, the £100 penalties are increased to £500 each.¹¹

International Expansion to the UK

The United Kingdom is a prime location for companies seeking international growth. Its economy is valued at $3.84 trillion, making it the sixth-largest in the world.^{15 16} And, it’s home to over 69 million consumers.¹⁵ Services dominate, contributing nearly 80% of activity, led by finance, retail, and creative industries.¹⁷ London is a global financial hub, hosting over 170 foreign banks and handling 38% of global foreign-exchange turnover.¹⁸

The UK also offers a strong geographic advantage. Its central time zone makes managing operations between North America, Europe, and Asia easier. On top of that, advanced infrastructure adds to the appeal. The country has more than 70 airports, 120 ports, and one of the largest rail networks in Europe. This connectivity supports both trade and mobility.¹⁹

Apart from this, a highly skilled workforce further strengthens the business environment. Four of the world’s top ten universities are UK-based, and international talent is widely available.²⁰ Companies benefit from a diverse and well-educated labour pool.

Incentives include no withholding tax on dividends, attractive venture capital reliefs, and freeports offering tax advantages. Businesses can streamline compliance using UK corporate tax software or a corporate tax rate calculator. Guidance about corporate gifts and capital gains also helps manage obligations effectively.²¹

The steps to set up a company in the UK are:

1. Conduct market research and prepare financial forecasts.
2. Select a business name and location.
3. Register the company with Companies House.
4. Complete tax registration and track finances carefully.

The UK gives a business every flavour it needs to prosper. Skilled labour, economic strength, and clear regulations set the foundation for business growth. Read Wise’s guide onHow to Start a Business in the United Kingdom for a step-by-step overview of registering your UK company and managing finances efficiently.

Discover the top 5 best Corporate Tax softwares

Incorporation of Business in the United Kingdom

Registration must be completed through Companies House to incorporate a business in the UK. The process is relatively simple, but companies must prepare the following:²²

Company name: Must be unique and not identical to an existing business.

• Shareholders or guarantors: A director can also hold this role at least one is required.
• Persons with Significant Control (PSC): Individuals holding more than 25% of shares or voting rights must be disclosed.
• Company documents: These include the memorandum of association, articles of association, statement of capital, or statement of guarantee.
• Registered office address: A UK-based address where official correspondence is sent.
• Standard Industrial Classification (SIC) code: Identifies the nature of the company’s business activities.
• Tax registration: Once incorporated, companies must register with HMRC. The UK corporate tax year runs from 1 April to 31 March, and the filing deadline is 12 months after the end of the accounting period.

Note: The recent UK corporate tax increase to 25% highlights the government’s focus on raising revenue from larger companies. Businesses planning expansion should review how this change affects profit thresholds to avoid unexpected liabilities.

Business entities in the UK

The main entity types include:²³

• Sole Trader: An individual trading alone, carrying unlimited liability. Registration with HMRC as self-employed is required if annual earnings exceed £1,000.
• Private Company Limited by Shares (Ltd): The most common type, requiring at least one shareholder and one director. Liability is limited to the amount invested, and Companies House registration is mandatory.
• Company Limited by Guarantee: Common among charities and clubs. Members do not hold shares but guarantee a fixed contribution if the company is wound up.

International corporate tax best practices

Here are some of the best strategies to ensure compliance with local tax laws, save more money, and reduce tax burdens.

• Stay compliant with local and international tax laws
  Complete the legal registration process in every country where your business operates. File all required tax returns on time to avoid penalties, and ensure you stay up to date with local tax laws to remain fully compliant.

• Adhere to global standards set by OECD
  Companies should understand and adhere to global standards set by organisations like the Organisation for Economic Co-operation and Development (OECD). With frameworks like Base Erosion and Profit Shifting (BEPS) and Pillar Two Global Minimum Tax, companies can ensure they are transparent, prevent tax avoidance, and avoid legal risks.

• Leverage double taxation treaties (DTTs)
  DTTs are essential in making sure that you're not taxed on the same income twice. Therefore, CFOs and Directors need to have a clear understanding of these treaties between the countries in which your business operates and how they can potentially relieve your tax burden. The UK has Double Taxation Agreements with over 120 countries. ²⁴

• Maintain up-to-date and transparent financial records
  Maintaining clear and up-to-date financial records helps companies prepare accurate tax returns, reducing the risk of errors that could lead to penalties. Additionally, having organised financial records simplifies the process during financial audits and HMRC investigations.

Take the complexity out of international expansion with Wise Business

Researching corporate tax is a crucial step when expanding your business into a new country. The next step is setting up the financial infrastructure to handle the complexities of operating across borders, from managing multi-currency cash flow to mitigating FX risk.

The Wise Business account provides the financial tools to make your international expansion to the UK efficient and simple. It's the one account for managing your money globally.

With a Wise Business account, you can:

• Pay suppliers and initial fees: Pay suppliers, global payroll, and one-off incorporation costs in the local currency.

• Get paid like a local: Use local account details for 8+ major currencies to easily receive payments from customers or investors.

• Manage your money across borders: Hold and exchange 40+ currencies in one account, always with the mid-market exchange rate and low, transparent fees.

• Streamline your accounting: Integrate with tools like Xero or QuickBooks to simplify tracking your company's international finances.

• Empower your team: Provide multi-user access for your finance team and issue expense cards for international spending.
  Wise is designed to support every step of your journey, from paying your first registration fee to receiving international payments and managing your global treasury.

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FAQs - Corporate tax in United Kingdom

Who is liable for corporate tax in the United Kingdom?

All UK resident companies are liable for corporation tax on their worldwide profits. Non-resident companies are only liable for corporation tax on profits arising from UK sources, such as trading through a UK branch or agency. Companies incorporated in the UK are automatically considered UK residents for tax purposes.

Are there any tax incentives for businesses in the United Kingdom?

Yes, the UK offers several tax incentives, including Research and Development (R&D) tax credits, which can provide relief of up to 130% for qualifying R&D expenditure. The Annual Investment Allowance allows businesses to deduct the full cost of qualifying plant and machinery up to £1 million per year. There's also the Patent Box regime, which applies a reduced 10% corporation tax rate to profits from qualifying intellectual property.²⁵

What is the tax treatment of dividends in the United Kingdom?

Dividends received by UK companies from other UK companies are generally exempt from corporation tax. However, dividends from overseas companies may be subject to corporation tax, though relief may be available under double taxation treaties. When UK companies pay dividends to shareholders, no corporation tax is due on the dividend payment itself.²¹

What is the process for registering for corporate tax in the United Kingdom?

Companies must register for corporation tax within 3 months of starting to do business or becoming a UK resident. Registration is done through HMRC's online services or by post using form CT41G. Once registered, companies receive a Unique Taxpayer Reference (UTR), which is used for all corporation tax matters.²⁶

What are the common pitfalls to avoid regarding corporate tax in the United Kingdom?

Common pitfalls include failing to register for corporation tax within the 3-month deadline, missing the 12-month filing deadline, incorrectly calculating marginal relief for companies with profits between £50,000 and £250,000, and not maintaining adequate records to support tax returns. Companies should also be aware of the quarterly payment requirements for large companies and ensure they have sufficient cash flow to meet these obligations.

Sources used in this article:

1. UK Corporation Tax Rates
2. Global Corporate Tax Rates by Country
3. PwC Tax Summaries: UK Corporate Taxes
4. PwC Tax Summaries: UK Income Determination
5. Tax reliefs, allowances, and expenses for businesses
6. HMRC Research and Development (R&D) Tax Reliefs
7. How to Pay UK Corporation Tax
8. Guidance on Paying Corporation Tax in Instalments
9. HMRC Corporation Tax Interest Charges
10. HMRC Interest Rates for Late and Early Payments
11. Penalties for Late Filing of Company Tax Returns
12. Full List of HMRC Interest Rates
13. Government Business Guide for Importers and Employers
14. UK Business and Tax Information
15. IMF UK Country Profile
16. UK Trade Strategy
17. How the UK Economy Works
18. Key Facts About the UK as a Financial Centre
19. UK Infrastructure Investment
20. UK Talent and Labour Market
21. PwC Tax Summaries: UK Withholding Taxes
22. How to Set Up a Limited Company in the UK
23. Uniwide Business Services in the UK
24. Overview of UK Double Taxation Treaties
25. Corporation Tax Allowances and Reliefs
26. Registering an Unincorporated Association for Corporation Tax

Sources last checked 27/08/2025